Diana Louise Houck v. Substitute Trustee Service
Filing
PUBLISHED AUTHORED OPINION filed. Originating case number: 5:13-cv-00066-DSC. [999612967]. [13-2326]
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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 13-2326
DIANA LOUISE HOUCK; STEVEN G. TATE,
Plaintiffs - Appellants,
v.
SUBSTITUTE TRUSTEE SERVICES, INC.,
Defendant - Appellee,
and
LIFESTORE BANK; GRID FINANCIAL SERVICES, INC.,
Defendants.
------------------------PAULA STEINHILBER BERAN,
Court-Assigned Amicus Counsel.
Appeal from the United States District Court for the Western
District of North Carolina, at Statesville.
David S. Cayer,
Magistrate Judge. (5:13-cv-00066-DSC)
Argued:
May 12, 2015
Decided:
July 1, 2015
Before NIEMEYER, DIAZ, and FLOYD, Circuit Judges.
Vacated, reversed in part, and remanded by published opinion.
Judge Niemeyer wrote the opinion, in which Judge Diaz and Judge
Floyd joined.
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M. Shane Perry, COLLUM & PERRY, Mooresville, North Carolina, for
Appellants.
Jeffrey Allen Bunda, HUTCHENS LAW FIRM, Charlotte,
North Carolina, for Appellee. Paula Steinhilber Beran, TAVENNER
& BERAN, PLC, Richmond, Virginia, as Court-Assigned Amicus
Counsel.
2
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NIEMEYER, Circuit Judge:
Diana Houck commenced this action under 11 U.S.C. § 362(k),
alleging
that
the
defendants
foreclosed
on
and
sold
her
homestead in violation of the automatic stay triggered by her
filing of a Chapter 13 bankruptcy petition.
The district court
granted the motion to dismiss filed by one of the defendants,
Substitute
Trustee
concluding
that
Services,
Houck
Inc.
(the
to
allege
failed
“Substitute
facts
that
Trustee”),
plausibly
supported her allegation that the violation of the automatic
stay
was
willful,
a
necessary
element
of
a
§
362(k)
claim.
Because we find to the contrary, we vacate the district court’s
judgment, reverse its order dismissing Houck’s claims against
the Substitute Trustee, and remand for further proceedings.
I
In 2000, Houck’s father deeded to her part of the family
farm located in Ashe County, North Carolina.
After Houck had
secured financing from a predecessor to LifeStore Bank, F.S.A.,
she and her then-fiancé, Ricky Penley, placed a mobile home on
part of the homestead.
In 2007, Houck refinanced the loan so that she and Penley
could remodel the family farmhouse, but within a year, she lost
her job and began having difficulty making her loan payments.
In the summer of 2009, after she and Penley were married, Houck
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asked LifeStore for a loan modification.
LifeStore, however,
referred her to Grid Financial Services, Inc., a debt collection
agency, which denied her request because she was unemployed.
Houck thereafter defaulted on her loan.
In July 2011, the Hutchens Law Firm (formerly Hutchens,
Senter, Kellam & Pettit, P.A.) served Penley with a notice of
foreclosure.
To stop the foreclosure proceedings, Houck, acting
pro se, filed a Chapter 13 bankruptcy petition on September 12,
2011.
the
The next day, the Hutchens Law Firm notified the Clerk of
Superior
bankruptcy
Court
petition
of
Ashe
and
County
consequently
proceedings had to be stayed.
bankruptcy
court
that
dismissed
Houck
that
had
all
filed
a
foreclosure
A few weeks later, however, the
Houck’s
petition
because
she
had
failed to file certain schedules and statements in accordance
with applicable bankruptcy rules, and the Substitute Trustee, by
its counsel, the Hutchens Law Firm, reactivated the foreclosure
proceedings.
On December 16, 2011, Houck, again acting pro se, filed a
second
Chapter
13
bankruptcy
foreclosure proceedings.
petition,
again
to
stop
the
On that same day, Penley called the
Hutchens Law Firm to notify it of the bankruptcy filing.
The
employee of the Firm with whom Penley spoke acknowledged that
the Firm had a file for Houck.
Penley told the employee that
Houck had filed a second bankruptcy petition earlier that day,
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and he provided the employee with the new case number.
On that
same day, Penley also contacted LifeStore to notify it of the
new bankruptcy petition.
LifeStore told Penley that it intended
to wait for notice from the bankruptcy court before taking any
action.
On December 18, 2011, two days after Houck had filed her
second bankruptcy petition, the bankruptcy court ordered Houck
to
appear
dismissed.
Trustee,
and
show
why
her
petition
should
not
be
Two days later, on December 20, 2011, the Substitute
represented
homestead
cause
at
a
by
the
Hutchens
foreclosure
sale.
Law
The
Firm,
sold
following
Houck’s
day,
the
bankruptcy court dismissed Houck’s second bankruptcy petition.
Because Houck had filed the second petition with the purpose of
preventing the sale of her homestead and it had already been
sold,
she
did
not
object
to
the
petition’s
dismissal.
Thereafter, Penley endeavored unsuccessfully to undo the sale.
In March 2012, after the sheriff issued a notice to vacate,
Houck
and
Penley
left
the
homestead
and
moved
into
a
small
cabin.
Houck retained counsel and commenced this action, naming as
defendants LifeStore, Grid Financial, and the Substitute Trustee
and asserting a claim against them under 11 U.S.C. § 362(k) for
violation
of
the
automatic
stay.
related state law claims.
5
She
also
asserted
several
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The
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Substitute
complaint
under
contending
that
Trustee
Federal
the
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filed
a
motion
to
dismiss
the
Rule
of
Civil
Procedure
12(b)(6),
complaint
had
failed
to
that
allege
the
Substitute Trustee was aware of the second bankruptcy petition’s
filing at the time it conducted the foreclosure sale of Houck’s
homestead.
The district court granted the motion by order dated
October 1, 2013, concluding that Houck had “failed to allege
that [she] sent notice of the second petition to [the Substitute
Trustee] or that [the Substitute Trustee] had any notice of the
[bankruptcy] petition.”
Based on that deficiency, the court
also dismissed Houck’s related state law claims.
2013,
Houck
court’s
filed
order
an
interlocutory
dismissing
her
appeal
claims
On October 28,
from
against
the
district
the
Substitute
Grid
Financial,
Trustee.
The
remaining
defendants,
various
LifeStore
motions
to
and
thereafter
filed
dismiss
or
for
summary
judgment.
In one of those motions, Grid Financial contended
that the district court lacked subject matter jurisdiction over
Houck’s § 362(k) claim, maintaining that the provision did not
create
a
private
cause
of
action
outside of the bankruptcy court.
that
could
be
adjudicated
By order dated February 20,
2014, the district court granted Grid Financial’s motion and
dismissed
Houck’s
complaint,
agreeing
that
it
lacked
subject
matter jurisdiction over Houck’s federal claim for violation of
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the automatic stay and declining to exercise its discretion to
adjudicate her state law claims.
The Clerk of Court thereafter
entered judgment and closed the case.
Subsequently,
we,
sua
sponte,
dismissed
Houck’s
pending
appeal of the district court’s October 1, 2013 order dismissing
the
Substitute
Trustee
interlocutory order.
because
it
had
been
taken
that
district
the
jurisdictional
court’s
Financial’s
February
motion
to
defect
20,
dismiss
2014
for
was
order
lack
Houck
filed
motions
We concluded
not
cured
by
granting
of
jurisdiction, as that order was also not final.
Thereafter,
an
Houck v. Substitute Tr. Servs., Inc., 582
F. App’x 230, 230 (4th Cir. 2014) (per curiam).
further
from
subject
the
Grid
matter
Id. at 230 n.*.
requesting
that
the
district court reopen the case and reconsider its February 20,
2014 order.
The district court denied the motions, reiterating
that it had finally decided the case with that order.
Houck
then filed an unopposed motion in our court for clarification,
seeking to resolve her procedural predicament created by the
district
court’s
statement
that
its
February
20,
2014
order
finally closed the case and our contrary statement that that
order
was
not
final.
issued on
our
dismissal
In
of
response,
Houck’s
rehearing.
7
we
recalled
appeal
and
the
mandate
granted
panel
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her
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now-reopened
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appeal,
Houck
contends
that,
in
dismissing her § 362(k) claim against the Substitute Trustee,
the district court applied the wrong legal standard for ruling
on a Rule 12(b)(6) motion and erroneously concluded that her
complaint failed to allege sufficient facts to state a plausible
claim for relief.
II
At the outset, we determine whether we have jurisdiction to
hear Houck’s appeal.
See, e.g., Chevron Corp. v. Page (In re
Naranjo), 768 F.3d 332, 342 (4th Cir. 2014).
In its October 1, 2013 order, the district court granted
the Substitute Trustee’s motion to dismiss on the ground that
Houck’s
complaint
failed
to
allege
that
she
had
given
the
Substitute Trustee notice of her bankruptcy petition before the
Substitute Trustee sold her homestead, thus precluding any claim
that the Substitute Trustee’s conduct was willful.
But because
LifeStore and Grid Financial were not parties to that motion and
remained defendants in the action, Houck’s appeal of the October
1 dismissal order was interlocutory.
Moreover, Houck made no
request that the district court certify the order as a final
judgment under Federal Rule of Civil Procedure 54(b), although
it
appears
requirement.
that
she
could
have
satisfied
that
rule’s
See, e.g., Nystedt v. Nigro, 700 F.3d 25, 29 (1st
8
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Cir. 2012) (upholding a Rule 54(b) certification of an order
granting a Rule 12(b)(6) motion to dismiss filed by some but not
all
of
appeal
the
sua
defendants).
sponte
Consequently,
because
it
was
we
not
dismissed
taken
from
decision, as required by 28 U.S.C. § 1291(a).
Houck’s
a
final
Houck, 582 F.
App’x at 230.
After Houck requested that we reconsider the effect of the
district
court’s
Financial’s
motion
February
to
20,
dismiss
2014
for
order
lack
of
granting
subject
Grid
matter
jurisdiction, we recalled our mandate and now hear this appeal
to consider her arguments.
If the district court’s February 20, 2014 order, entered
several
months
against
the
Houck’s
appeal
after
the
Substitute
might
court
Trustee,
be
had
was
reviewable
dismissed
a
final
under
Houck’s
claims
judgment,
the
then
doctrine
of
cumulative finality -- a finality achieved by the cumulative
effect of the October 1, 2013 dismissal order and the February
20,
2014
dismissal
order.
See
Equip.
Fin.
Grp.,
Inc.
v.
Traverse Computer Brokers, 973 F.2d 345, 347 (4th Cir. 1992)
(recognizing
claims
are
cumulative
dismissed,
finality
albeit
at
in
circumstances
different
times,
where
all
before
the
appeal taken from the first dismissal order is considered).
Upon close review of the district court’s February 20, 2014
order, we conclude that it was indeed a final judgment.
9
In that
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order, the district court granted Grid Financial’s motion to
dismiss -- LifeStore was not a party to the motion -- concluding
that it did not have subject matter jurisdiction over Houck’s
§ 362(k) claim for violation of the Bankruptcy Code’s automatic
stay.
Because subject matter jurisdiction goes to the power of
the court to adjudicate a claim, an order dismissing a claim for
lack of subject matter jurisdiction necessarily dismisses the
claim as to all defendants.
And, indeed, the district court’s
February 20, 2014 order reflected this effect by dismissing the
entire complaint without limiting its ruling to any particular
party.
Consistently, the district court also directed the Clerk
of Court to enter judgment by way of a separate docket entry, as
required by Federal Rule of Civil Procedure 58 for entry of a
final judgment.
intended
to
Finally, the court later confirmed that it had
dismiss
the
entire
case
when
it
denied
Houck’s
motions to reopen the case and to reconsider its February 20,
2014 ruling.
Specifically, it stated that “[o]n February 20,
2014, the Court dismissed [Houck’s] only federal claim,” and it
declined to exercise supplemental jurisdiction over her pendent
state law claims.
Because the district court’s February 20,
2014 order disposed of the entire case, “leav[ing] nothing for
[it] to do,” United States v. Breeden, 366 F.3d 369, 372 (4th
Cir. 2004) (quoting Coopers & Lybrand v. Livesay, 437 U.S. 463,
467 (1978)) (internal quotation marks omitted), the order was a
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final judgment.
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This brings us to consideration of the doctrine
of cumulative finality.
In Equipment Finance, we articulated the requirements for
application of the doctrine.
There, the district court granted
summary judgment to one of two defendants, and the plaintiff
appealed the district court’s order.
346-47.
Equip. Fin., 973 F.2d at
While the appeal was pending, the plaintiff voluntarily
dismissed its claim against the second defendant.
Id. at 347.
On appeal, we rejected the first defendant’s argument that we
lacked jurisdiction, concluding that the subsequent dismissal of
the
claim
against
consideration
of
the
the
remaining
appeal
defendant
“effectively
finality requirements of Rule 54(b).”
Id.
prior
to
our
satisfie[d]
the
Noting that the
case’s “procedural circumstances . . . warrant[ed] a practical
approach to finality,” we recognized a doctrine of “cumulative
finality
where
all
joint
claims
or
all
multiple
parties
dismissed prior to the consideration of the appeal.”
Id.
are
The
doctrine applies, however, only when the appellant appeals from
an
order
that
the
district
court
immediate appeal under Rule 54(b).
could
have
certified
for
See In re Bryson, 406 F.3d
284, 287-89 (4th Cir. 2005).
In
this
case,
the
district
court
dismissed
completely
Houck’s claims against the Substitute Trustee in its October 1,
2013 order, leaving open only her claims against LifeStore and
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Grid Financial.
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Because the court could have certified such an
order as a final judgment under Rule 54(b) and because the court
later entered final judgment against the remaining defendants
with its February 20, 2014 order before we considered Houck’s
interlocutory
cumulative
appeal,
finality
we
conclude
applies
and
that
that
the
we
doctrine
therefore
of
have
jurisdiction to hear her appeal. 1
III
A second jurisdictional issue is presented by the district
court’s February 20, 2014 order, in which the court dismissed
Houck’s
federal
claim
matter jurisdiction.
on
the
ground
that
it
lacked
subject
Of course, if the court lacked subject
matter jurisdiction to hear Houck’s § 362(k) claim, it could not
have ruled on the Substitute Trustee’s Rule 12(b)(6) motion to
dismiss for failure to state a claim upon which relief could be
granted.
As noted above, on February 20, 2014, the district court
concluded,
without
further
discussion,
1
that
a
claim
under
Houck argues, unnecessarily as it turns out, that we could
hear her appeal under the collateral order doctrine.
That
doctrine, however, would not be applicable here, because Houck’s
claim against the Substitute Trustee was not a collateral matter
and Houck could well have obtained review of the dismissal order
on appeal from the final judgment. See generally Mohawk Indus.,
Inc. v. Carpenter, 558 U.S. 100 (2009); Swint v. Chambers Cnty.
Comm’n, 514 U.S. 35 (1995).
12
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§ 362(k)
for
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violation
of
the
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automatic
stay
could
only
be
brought in a bankruptcy court, not in a district court.
It
relied for support on Scott v. Wells Fargo Home Mortgage, Inc.,
326 F. Supp. 2d 709, 719 (E.D. Va.), aff’d sub nom. Scott v.
Wells Fargo & Co., 67 F. App’x 238 (4th Cir. 2003) (per curiam),
where
the
violation
§ 362[k]
district
of
court
§ 362[k]
arguably
is
creates
stated,
“[I]t
cognizable
[a]
in
private
is
doubtful
this
that
Court.
right
of
a
While
action
for
willful violation of [the] automatic stay, [it] does not create
a private cause of action outside of the Bankruptcy Court for
violations of [the] automatic stay.”
(Citation omitted).
The
Scott court in turn relied for support on Dashner v. Cate, 65
B.R. 492 (N.D. Iowa 1986).
But
in
Dashner,
the
district
court
did
not
consider
§ 362(k) because, at the time of the stay violation at issue
there, § 362(k) had not yet been enacted.
65 B.R. at 494.
The
Dashner court simply held that before 1984 -- i.e., before the
creation of what is now a § 362(k) cause of action -- nothing in
the
Bankruptcy
Code
“indicate[d]
that
Congress
intended
to
create a private right of action outside of [the] bankruptcy
court” for a violation of the automatic stay.
Id. at 495.
To
reach that conclusion, the court pointed to Stacy v. Roanoke
Mem’l Hosps. (In re Stacy), 21 B.R. 49 (Bankr. W.D. Va. 1982).
The Stacy court likewise considered a pre-1984 violation of the
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automatic stay and concluded, “The proscriptive provision of the
Code in question here, the § 362 automatic stay provision, is
not a proscription to be enforced by a debtor or any third
party.
A stay is an order of the [bankruptcy] court, to be
enforced by the [bankruptcy] court.”
Thus,
both
Dashner
and
Id. at 52.
Stacy,
on
which
Scott
relied,
analyzed the pre-1984 version of § 362, which lacked subsection
(k)’s private cause of action, and therefore are inapposite.
For that reason, neither the district court’s opinion in Scott
nor our unpublished, one-paragraph affirmance of that decision
supports the district court’s determination below that only a
bankruptcy court may entertain a § 362(k) claim.
Both Houck and the Substitute Trustee now agree that the
district court erred in determining that it lacked jurisdiction
to
adjudicate
matter
Houck’s
jurisdiction
§
362(k)
cannot
be
claim.
But
conferred
by
because
subject
agreement,
see
McCorkle v. First Pa. Banking & Trust Co., 459 F.2d 243, 251
(4th Cir. 1972), we appointed counsel to submit an amicus curiae
brief defending the district court’s position on the issue. 2
We
turn now to whether the district court erred in concluding that
it
lacked
subject
matter
jurisdiction
to
adjudicate
a
claim
brought under § 362(k).
2
We are grateful to Paula Steinhilber Beran, Esq., for
providing this “friend of the court” service to us.
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As background, the filing of a bankruptcy petition operates
immediately to stay creditors from pursuing certain enumerated
collection actions against the debtor or the debtor’s estate.
See 11 U.S.C. § 362(a).
This automatic stay is “one of the
fundamental debtor protections provided by the bankruptcy laws.”
S. Rep. No. 95-989, at 54 (1978), reprinted in 1978 U.S.C.C.A.N.
5787, 5840.
“It gives the debtor a breathing spell from his
creditors” and “stops all collection efforts, all harassment,
and all foreclosure actions.”
Before
1984,
when
Id.
Congress
enacted
§
362(k)
(designated
§ 362(h) when enacted), the automatic stay appeared to be merely
proscriptive.
Section
362(a)
provided
that
the
filing
of
a
bankruptcy petition “operates as a stay,” without prescribing
any
sanction
for
its
violation.
11
U.S.C.
§
362(a).
The
Bankruptcy Code simply gave the bankruptcy court authority to
administer the proscription.
the
bankruptcy
court
to
For example, § 362(d) authorized
“grant
relief
from
the
stay,”
and
§ 362(e) and § 362(f) otherwise authorized the bankruptcy court
to
regulate
the
stay’s
length,
conditions,
and
termination.
Thus, courts had held that the § 362(a) automatic-stay provision
did not provide a party with an independent right of action for
damages but rather with a procedural mechanism to be regulated
and enforced by the bankruptcy court.
at 52.
15
See, e.g., Stacy, 21 B.R.
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In
1984,
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however,
with
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the
enactment
of
the
Bankruptcy
Amendments and Federal Judgeship Act of 1984, Pub. L. No. 98353, 98 Stat. 333 (codified in scattered sections of 11 and 28
U.S.C.), Congress
created
a
private
cause
of
action
for
the
willful violation of a stay, authorizing an individual injured
by
any
such
§ 362(k). 3
violation
to
recover
damages.
See
11
U.S.C.
In creating the cause of action, Congress did not
specify which courts possess jurisdiction over a § 362(k) claim
for violation of the automatic stay.
Under the Bankruptcy Amendments and Federal Judgeship Act,
the
district
courts
were
given
“original
and
exclusive
jurisdiction in all cases under title 11,” 28 U.S.C. § 1334(a),
and
“original
but
not
exclusive
jurisdiction
of
all
civil
proceedings arising under title 11, or arising in or related to
cases
3
under
title
11,”
id.
§
1334(b).
But
they
were
Section 362(k) reads in full:
(1) Except
as
provided
in
paragraph
(2),
an
individual injured by any willful violation of a stay
provided by this section shall recover actual damages,
including
costs
and
attorneys’
fees,
and,
in
appropriate
circumstances,
may
recover
punitive
damages.
(2) If such violation is based on an action taken by
an entity in the good faith belief that subsection (h)
applies to the debtor, the recovery under paragraph
(1) of this subsection against such entity shall be
limited to actual damages.
16
also
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authorized
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to
refer
proceedings.
to
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bankruptcy
judges
any
such
cases
or
See id. § 157(a); Exec. Benefits Ins. Agency v.
Arkison, 134 S. Ct. 2165, 2171 (2014).
In addition, the Act
authorized the district courts to withdraw, in whole or in part,
any case or proceeding that they had referred.
§ 157(d).
In
short,
while
the
district
See 28 U.S.C.
courts
were
given
jurisdiction over bankruptcy cases, Congress also delegated to
the bankruptcy courts, “as judicial officers of the [district
courts],” Wellness Int’l, Ltd. v. Sharif, 135 S. Ct. 1932, 1945
(2015)
(quoting
omitted),
28
U.S.C.
adjudicatory
§
151)
authority,
(internal
subject
quotation
to
the
marks
district
courts’ supervision as particularized in § 157 and the limits
imposed by the Constitution.
the
Act,
in
conferring
such
In no circumstance, however, did
adjudicatory
authority,
give
a
bankruptcy court jurisdiction to the exclusion of a district
court.
A claim under § 362(k) for violation of the automatic stay
is a cause of action arising under Title 11, and as such, a
district
court
has
jurisdiction
over
it.
Of
course,
under
§ 157(a), a district court may refer a § 362(k) claim to the
bankruptcy court.
If the § 362(k) claim did not “stem[] from
the bankruptcy itself or would [not] necessarily be resolved in
the claims allowance process,” Stern v. Marshall, 131 S. Ct.
2594, 2618 (2011), or would only “augment the bankruptcy estate
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and would otherwise exis[t] without regard to any bankruptcy
proceeding,”
Wellness,
135
S.
Ct.
at
1941
(alteration
in
original) (citation and internal quotation marks omitted), the
§ 157 referral would be for recommended findings of fact and
conclusions of law, see Exec. Benefits, 134 S. Ct. at 2171-72,
2175.
But even if the § 157 referral authorized the bankruptcy
court to adjudicate the claim to final judgment, it would not
deprive
the
district
court
of
jurisdiction.
See
28
U.S.C.
§ 1334(b); see also Justice Cometh, Ltd. v. Lambert, 426 F.3d
1342, 1343 (11th Cir. 2005) (per curiam); Price v. Rochford, 947
F.2d 829, 832 n.1 (7th Cir. 1991).
But see Eastern Equip. &
Servs. Corp. v. Factory Point Nat’l Bank, 236 F.3d 117, 121 (2d
Cir. 2001) (per curiam) (stating, without considering 28 U.S.C.
§ 1334, that a § 362(k) claim “must be brought in the bankruptcy
court,
rather
than
in
the
district
court,
which
only
has
appellate jurisdiction over bankruptcy cases”).
The
amicus
contends
that
jurisdiction
to
hear
Houck’s
§ 362(k) claim was vested solely in the bankruptcy court because
of a standing referral order, entered under § 157(a), which has
been in place in one form or another in the Western District of
North Carolina since July 30, 1984.
At the time relevant to
this case, that order provided that “all bankruptcy matters”
were
“automatically
amicus argues
that,
referred”
under
to
the
§ 157(d),
18
bankruptcy
until
such
judge.
time
as
The
that
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reference
Filed: 07/01/2015
is
jurisdiction
withdrawn,
to
the
the
Pg: 19 of 33
district
bankruptcy
court
court.
She
has
ceded
its
maintains
that
§ 157(d)’s requirement that “cause” be shown for a discretionary
withdrawal of a referral confirms her interpretation.
See 28
U.S.C. § 157(d) (“The district court may withdraw, in whole or
in part, any case or proceeding referred under this section, on
its own motion or on timely motion of any party, for cause
shown” (emphasis added)).
But nowhere in the text of § 157 is there any indication
that the provision is jurisdictional, as the amicus claims.
text
indicates
that
§
157
is
simply
a
procedural
The
mechanism
authorizing a bankruptcy court, upon referral from a district
court
(1)
to
hear
constitutionally
core
claims
to
final
judgment, subject to appeal in the district court, and (2) to
recommend
findings
of
fact
and
conclusions
of
law
to
the
district court in constitutionally non-core matters for de novo
review and final judgment by the district court.
See Exec.
Benefits, 134 S. Ct. at 2171-72, 2175.
Indeed, in Stern, the
Court
more
observed
regulator,
that
directing
§
157
where
is
little
adjudication
of
than
a
traffic
bankruptcy
matters
can take place, and that it does not implicate subject matter
jurisdiction.
131 S. Ct. at 2607.
As the Court stated:
Section 157 allocates the authority to enter final
judgment between the bankruptcy court and the district
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court.
That allocation does not implicate questions
of subject matter jurisdiction.
Id. (emphasis added) (citation omitted); see also Home Ins. Co.
of Ill. v. Adco Oil Co., 154 F.3d 739, 742 (7th Cir. 1998) (“[A]
judge’s failure to follow orderly procedures [under § 157] for
allocating bankruptcy matters within a district court does not
deprive the court of subject-matter jurisdiction”).
with
its
ruling,
the
Stern
Court
held
that
Consistent
because
the
provisions of § 157 were not jurisdictional, their proscriptions
could be waived.
131 S. Ct. at 2607-08.
In the same vein, the fact that litigants may consent to a
bankruptcy court’s adjudication of a non-core proceeding also
indicates
that
§ 157(c)(2)
statutorily
§
157
is
(permitting
non-core
not
jurisdictional.
bankruptcy
proceedings
with
courts
the
See
to
parties’
28
U.S.C.
adjudicate
consent);
Wellness, 135 S. Ct. at 1939 (holding that bankruptcy courts
may, with the parties’ knowing and voluntary consent, adjudicate
Stern claims -- i.e., statutorily core but constitutionally noncore proceedings).
Thus, even if Houck’s § 362(k) claim was indeed subject to
the
Western
District
of
North
Carolina’s
standing
order
referring “all bankruptcy matters” to the bankruptcy court, the
district court’s failure to follow the procedural rule did not
deprive it of subject matter jurisdiction.
20
The district court
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always had original jurisdiction over any bankruptcy matter, and
any breach of § 157 would “not implicate questions of subject
matter jurisdiction.”
Stern, 131 S. Ct. at 2607; see also Home
Ins. Co., 154 F.3d at 742.
While it may be that the district
court should have sent Houck’s § 362(k) claim to the bankruptcy
court
in
accordance
with
its
standing
order,
the
amicus
has
failed to explain how not doing so deprived the district court
of the original jurisdiction that Congress bestowed upon it by
way of § 1334.
See Justice Cometh, 426 F.3d at 1343 (stating
that, although the district courts may refer to the bankruptcy
courts proceedings arising under Title 11, “the explicit § 1334
grant
of
original
forecloses
a
jurisdiction
conclusion
that
over
the
Title
11
district
cases
court[s]
clearly
lack[]
subject matter jurisdiction over [§ 362(k) claims]”); Price, 947
F.2d
at
832
n.1
(observing
that
the
plaintiff’s
claim
for
willful violation of the automatic stay “should probably have
been
referred
to
the
bankruptcy
court
under
[the
district
court’s standing order of reference],” but deciding that “the
defect [was] not jurisdictional”).
Moreover, neither Houck nor the Substitute Trustee objected
to
the
district
bankruptcy court.
court’s
failure
to
refer
this
case
to
the
Accordingly, any claim that the case should
have been tried in the bankruptcy court was waived or forfeited.
See Stern, 131 S. Ct. at 2607-08 (holding that the failure to
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raise the statutory limitations of § 157 amounted to a waiver or
forfeiture); Home Ins. Co., 154 F.3d at 742 (finding that the
district court had committed no reversible error in failing to
refer
the
matter
to
the
bankruptcy
court
because,
in
part,
neither of the parties challenged the district court’s decision
to hear the case).
At
bottom,
we
hold
that
the
district
court
had
subject
matter jurisdiction over Houck’s § 362(k) claim and therefore
that the court had authority to rule on the Substitute Trustee’s
motion to dismiss Houck’s claims against it, to which we now
turn.
IV
On the merits, Houck contends that the district court erred
in dismissing, under Federal Rule of Civil Procedure 12(b)(6),
her § 362(k) claim against the Substitute Trustee, arguing that
the
court
applied
the
wrong
legal
standard
and
that
her
complaint was legally sufficient under the proper standard.
In dismissing her claim, the district court applied the
standard:
“[I]f
after
taking
the
complaint’s
well-pleaded
factual allegations as true, a lawful alternative explanation
appears a more likely cause of the complained of behavior, the
claim
for
quotation
relief
marks
is
not
omitted).
plausible.”
The
22
court
(Citation
then
and
found
internal
that
the
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complaint
Filed: 07/01/2015
was
allegations
“replete
that
the
Pg: 23 of 33
with
generalized
[foreclosure]
sale
and
was
conclusory
‘improper’
or
‘conducted improperly’” and that “[t]he only specific factual
allegation
against
[the
Substitute
Trustee
was]
that
it
conducted the foreclosure sale in violation of the bankruptcy
stay.”
More specifically, the court focused on the elements of
a § 362(k) claim and noted that Houck had “failed to allege that
[she] sent notice of the second [bankruptcy] petition to [the
Substitute Trustee] or that [the Substitute Trustee] had any
notice
of
the
petition,”
thus
precluding
any
allegation
of
willfulness.
Houck argues that the district court improperly created a
balancing test for ruling on a Rule 12(b)(6) motion and that we
should “summarily reject[]” it because “it has no legal basis
and is logically unworkable.”
And as to the court’s finding
that the complaint was factually insufficient, she argues simply
that the complaint did sufficiently allege that the Substitute
Trustee
had
notice
of
her
bankruptcy
petition,
pointing
to
numerous paragraphs in her complaint.
It
is
well
established
that
a
motion
filed
under
Rule
12(b)(6) challenges the legal sufficiency of a complaint, see
Francis v. Giacomelli, 588 F.3d 186, 192 (4th Cir. 2009), and
that the legal sufficiency is determined by assessing whether
the complaint contains sufficient facts, when accepted as true,
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to “state a claim to relief that is plausible on its face,”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
This plausibility
standard requires only that the complaint’s factual allegations
“be enough to raise a right to relief above the speculative
level.”
In
Twombly, 550 U.S. at 555.
light
of
these
well-established
principles,
we
agree
with Houck that the district court’s articulated standard was
erroneous.
factual
While the court correctly accepted the complaint’s
allegations
as
true,
it
incorrectly
undertook
to
determine whether a lawful alternative explanation appeared more
likely.
To survive a motion to dismiss, a plaintiff need not
demonstrate
that
her
right
alternative
explanations
to
are
relief
less
is
likely;
probable
or
that
rather,
she
must
merely advance her claim “across the line from conceivable to
plausible.”
Twombly, 550 U.S. at 570.
If her explanation is
plausible, her complaint survives a motion to dismiss under Rule
12(b)(6),
alternative
regardless
of
explanation.
whether
The
there
district
is
a
more
court’s
plausible
inquiry
into
whether an alternative explanation was more probable undermined
the well-established plausibility standard.
Turning to Houck’s complaint, it sought to state a claim
for relief under 11 U.S.C. § 362(k), which, as we have noted,
creates
a
cause
of
action
for
24
an
individual
injured
by
a
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violation of the automatic stay imposed by § 362(a).
To recover
under § 362(k), a plaintiff must show (1) that the defendant
violated the stay imposed by § 362(a), (2) that the violation
was
willful,
violation.
and
(3)
that
the
plaintiff
was
injured
by
the
See, e.g., Garden v. Cent. Neb. Hous. Corp., 719
F.3d 899, 906 (8th Cir. 2013).
The
district
court
acknowledged
that
Houck’s
complaint
adequately alleged that the Substitute Trustee violated the stay
imposed
by
§
362(a).
But
the
court
determined
that
the
complaint insufficiently alleged that the Substitute Trustee had
notice
of
Houck’s
second
bankruptcy
petition
and
thus
willfully when it sold her homestead in foreclosure.
did
not
address
the
Substitute
Trustee’s
acted
The court
additional
argument
that the complaint also failed to allege adequately that Houck
had
been
injured
by
the
automatic-stay
violation.
Upon
our
examination of the complaint, however, we conclude that neither
position can be sustained, as the complaint adequately alleged
that
the
Substitute
Trustee
had
notice
of
Houck’s
second
bankruptcy petition and that Houck sustained injury as a result
of the violation.
By way of background, the complaint alleged that LifeStore
was
Houck’s
lender;
that
Grid
Financial
was
the
collection
agency for LifeStore; that the Substitute Trustee conducted the
foreclosure sale on behalf of LifeStore and Grid Financial; and
25
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that the Hutchens Law Firm represented these defendants in the
foreclosure proceedings.
The complaint then alleged that on December 16, 2011, Houck
filed a Chapter 13 bankruptcy petition “to stop the foreclosure
and keep the homestead.”
bankruptcy
petition,
Compl. ¶ 62.
Houck
It alleged that in her
“noticed
LifeStore
Bank,”
Compl.
¶ 64, and that, on the same day that Houck filed the petition,
her husband “called [the Hutchens Law Firm] and notified them of
the bankruptcy filing,” Compl. ¶ 65.
It detailed that call as
follows:
[Houck’s husband] told the person who answered the
phone that [Houck] had filed her bankruptcy petition.
The person on the phone said, “Hold on.”
She then
told him that she pulled up the file for Diana Houck
and acknowledged that they had a file for her.
[Houck’s husband] gave her the new bankruptcy case
number at that time.
He mentioned that it was a new
filing, filed that day. That was the end of the phone
call.
Compl. ¶ 65.
that
Houck
The complaint further alleged that on the same day
filed
the
petition,
her
husband
also
LifeStore by telephone and spoke with Anne Jones.”
“contacted
Compl. ¶ 66.
And it also detailed that call as follows:
He told her that [Houck] had filed a bankruptcy
[petition] that day. Ms. Jones said that people often
claim to have filed a bankruptcy without actually
filing and that [LifeStore] intended to wait for the
Court’s notice, or words to that effect.
Compl.
¶ 66.
information
and
The
complaint
belief[,]
further
LifeStore
26
alleged
received
that,
notice
“[u]pon
from
the
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AACER system of the bankruptcy filing on December 16, 2011, the
date that [Houck] filed the petition.”
Compl. ¶ 67.
it
noticed
alleged
petition
that
the
petition.”
the
same
defendants
way
they
Compl. ¶ 69.
“were
were
under
of
notice
Finally,
the
of
second
the
first
Based on these allegations of notice,
the complaint concluded that the defendants “violated 11 U.S.C.
§ 362 by intentionally and knowingly foreclosing on [Houck’s]
real
property
protection
added).
of
while
the
they
knew
automatic
that
stay.”
[Houck]
was
Compl.
under
¶ 93
the
(emphasis
It is difficult to imagine that a court could demand
more specificity with respect to the allegations of notice than
the details that Houck provided in her complaint.
With
Houck
respect
failed
adequately
homestead
to
to
the
allege
detailed.
was
sold
Substitute
injury,
The
in
the
complaint
violation
of
Trustee’s
argument
complaint
is
alleged
that
the
automatic
that
likewise
Houck’s
stay
on
December 20, 2011, to Fannie Mae, the insurer of LifeStore’s
loan, although the exhibits to the complaint show that it was
“Life
Store
Bank
c/o
purchased the property.
Grid
Financial
Services,
Compl. ¶ 74 & Ex. K.
Inc.,”
that
The complaint
further alleged that, “[u]pon information and belief, [Fannie
Mae] returned the homestead to LifeStore,” which “is presently
attempting to develop the land for sale.”
27
Compl. ¶¶
86-87.
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Finally, with respect to how the violation of the stay injured
her, the complaint alleged:
Because [Houck] and [her husband] were forced to move
from the homestead to a smaller cabin, they suffered
unreasonable loss including but not limited to:
a)
Loss of the rental income from the
smaller
cabin
as
[Houck]
and
[her
husband] were forced to move into the
cabin.
b)
Loss of [Houck’s] grandmother’s antiques
as there was nowhere to store them.
c)
Loss of value of four collector cars as
they are no longer being stored in a
garage.
d)
Loss of
stand.
e)
Loss of barn where [Houck] kept farm
equipment and vegetables prior to sale.
f)
Loss of
space.
g)
Loss of all of their seasonal clothing
because of loss of storage space.
h)
Lost
all
of
their
sentimental
possessions because of loss of storage
space.
i)
Emotional injury.
income
from
furniture
[Houck’s]
because
of
produce
smaller
Compl. ¶ 89.
In sum, we conclude that the complaint alleged facts that
more than adequately support Houck’s claims (1) that she gave
the
defendants,
including
the
Substitute
Trustee
through
its
attorneys, notice of her December 16, 2011 bankruptcy filing and
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(2) that as a result of the defendants’ violation of the stay,
she was injured.
Rather
detail,
allege
than
the
that
address
Substitute
she
Houck’s
Trustee
provided
it
factual
argues
with
allegations
that
notice
Houck
of
her
in
failed
any
to
bankruptcy
petition in writing, which, it argues, she was required to do
under 11 U.S.C. § 342(c)(1) (“If notice is required to be given
by the debtor to a creditor . . . , such notice shall contain
the name, address, and last 4 digits of the [social security]
number of the debtor”).
The Substitute Trustee reasons that,
because it did not receive such written notice before it sold
Houck’s
homestead,
automatic
it
stay.
could
This
not
have
argument,
willfully
however,
violated
distorts
the
the
requirements of § 362(k), which does not include any provision
that a particular form of notice be given.
Rather, it imposes
liability for a willful violation of the automatic stay.
We
agree with Houck that, because the complaint alleges that the
Substitute Trustee had actual notice of her December 16, 2011
bankruptcy petition when it sold her homestead, it sufficiently
alleges that the Substitute Trustee’s sale of her homestead on
December 20 with such notice was willful.
See Alan N. Resnick &
Henry J. Sommer, 3 Collier on Bankruptcy ¶ 362.02, at 362-21
(16th
ed.
2011)
(“A
party
that
has
received
notice
of
the
bankruptcy case, even if only oral notice, can be sanctioned for
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violation of the stay”); see also ZiLOG, Inc. v. Corning (In re
ZiLOG, Inc.), 450 F.3d 996, 1008 (9th Cir. 2006) (“‘[A] party
with
knowledge
knowledge
of
of
the
bankruptcy
automatic
proceedings
stay’
for
is
charged
purposes
of
with
awarding
damages under [§ 362(k)]” (quoting Knupfer v. Lindblade (In re
Dyer), 322 F.3d 1178, 1191 (9th Cir. 2003))).
At bottom, we conclude that Houck stated a plausible claim
for relief under § 362(k).
V
As an alternative ground for dismissal of Houck’s claims,
the Substitute Trustee contends that Houck was not an “eligible
debtor” when she filed her second bankruptcy petition within 180
days
of
petition,
her
first
filed
on
petition
December
and
16,
therefore
2011,
did
that
not
the
second
automatically
trigger the stay under § 362(a).
It is true that even though the automatic stay generally
operates
“without
the
necessity
for
judicial
intervention,”
Sunshine Dev., Inc. v. FDIC, 33 F.3d 106, 113 (1st Cir. 1994),
certain filings do not trigger the stay.
For example, a filing
under 11 U.S.C. § 301, like Houck’s Chapter 13 petitions, does
not operate as a stay “of any act to enforce any lien against or
security
interest
in
real
property
.
.
.
if
the
debtor
is
ineligible under [11 U.S.C. §] 109(g) to be a debtor in a case
30
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under [Title 11].”
Pg: 31 of 33
11 U.S.C. § 362(b)(21)(A).
Section 109(g)
in turn provides in relevant part:
Notwithstanding any other provision of this section,
no individual . . . may be a debtor under this title
who has been a debtor in a case pending under this
title at any time in the preceding 180 days if -(1) the case was dismissed by the court for
willful failure of the debtor to abide
by orders of the court, or to appear
before the court in proper prosecution
of the case . . . .
The 180-day filing ban is “an extraordinary statutory remedy for
perceived abuses of the [Bankruptcy] Code.”
Frieouf v. United
States (In re Frieouf), 938 F.2d 1099, 1104 (10th Cir. 1991)
(second emphasis added) (citation and internal quotation marks
omitted).
While Houck’s second bankruptcy petition was filed within
180
days
after
the
dismissal
of
her
first
petition,
the
Substitute Trustee has not shown that the first petition was
dismissed
because
Houck
willfully
failed
to
abide
by
the
bankruptcy court’s orders or to appear in proper prosecution of
her
case.
bankruptcy
Indeed,
court
the
record
dismissed
shows
Houck’s
to
first
the
contrary.
petition,
which
The
she
filed pro se, because she “failed to file certain schedules,
statements, or other documents.”
failure
being
willful
--
i.e.,
It made no mention of Houck’s
knowing
and
deliberate.
And
tellingly, the bankruptcy court did not dismiss her case with
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prejudice, which bankruptcy courts “frequently” do when imposing
the 180-day filing ban authorized by § 109(g).
See Colonial
Auto Ctr. v. Tomlin (In re Tomlin), 105 F.3d 933, 937 (4th Cir.
1997).
Moreover, when Houck filed her second petition within 180
days of her first petition’s dismissal, no party to the second
petition
questioned
Similarly,
when
whether
the
Houck
bankruptcy
was
court
an
eligible
ultimately
debtor.
dismissed
Houck’s second petition, it did so because she failed to satisfy
§ 109(h)(1)’s
credit-counseling
requirement,
not
because
she
failed to qualify as a debtor pursuant to § 109(g)(1).
Whether Houck was an eligible debtor when she filed her
second
petition
is
evidentiary support.
reject
the
a
fact-bound
question
that
requires
Finding no such evidence in the record, we
Substitute
Trustee’s
alternative
ground
for
allegations
were
dismissal.
VI
Based
on
its
conclusion
that
Houck’s
insufficient to state a claim under § 362(k), the district court
also
concluded
Because
the
that
court
her
“state
predicated
its
law
claims
dismissal
of
fail
the
as
well.”
state
law
claims on a finding that we now reverse, we vacate its order
dismissing
those
claims
as
well.
32
In
remanding
them
to
the
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district
court,
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however,
we
Pg: 33 of 33
express
no
opinion
as
to
their
merit.
*
*
*
The judgment of the district court is vacated; the court’s
October 1, 2013 order dismissing Houck’s § 362(k) claim against
the Substitute Trustee is reversed; and the case is remanded for
further proceedings.
VACATED, REVERSED IN PART, AND REMANDED
33
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